Chapter 10

The lowest price that ensures a continuous supply of the proper quality where and when needed and allows the supplier to make a reasonable profit, is commonly known as: A. a fair price B. a market price C. a cost-based price D. a buyer's market price E. a seller's market price

A. a fair price

A cash discount allows: A. the seller to secure prompt payment, and the buyer to pay a lower price per unit. B. the seller to secure prompt payment, but has no benefits for the buyer. C. the seller to demand payment in cash on demand (C.O.D.) upon receipt of goods. D. the buyer to pay a lower price per unit, but has no benefits for the seller. E. the buyer to always calculate the discount based on the delivery date.

A. the seller to secure prompt payment, and the buyer to pay a lower price per unit.

If the delivery date is some months or years away and if there is substantial chance of price escalation, a supplier may feel that there is far too much risk of loss to agree to sell under a: A. firm-fixed-price plus incentive fee (FFPIF) B. firm-fixed-price (FFP) C. cost-no-fee (CNF) D. cost-plus-fixed-fee (CPFF) E. cost-plus-incentive-fee (CPIF)

B. firm-fixed-price (FFP)

Costs incurred in the operation of a production plant or process, but normally cannot be related directly to any given unit of production or service provided, are called: A. direct costs B. variable costs C. semivariable costs D. indirect costs E. fixed costs

D. indirect costs

Accepting a price discount for ordering larger quantities leads to lower levels of anticipation inventory. T/F

False

Online reverse auctions are useful means of price determination for customized items. T/F

False

A payment bond protects the buyer against liens that might be granted to suppliers of material and labor to the bidder, in the event the bidder does not make proper payments to its suppliers. T/F

True

An exception to firm bidding allows the buyer and bidders the flexibility to clarify and define specifications and prices after the initial bids are received and then bidders submit best-and-final-offers (BAFOs) . T/F

True

Fixed costs generally remain the same regardless of the number of units produced. T/F

True

Prices may not be directly related to costs in the market approach. T/F

True